Assignment Task:
The following table presents the long-term debt and shareholders' equity of Caledonian plc for March 2021. During the past year, the firm issued 20 million new ordinary shares at a total price of £52 million, and £16 million shares in new longterm debt. The company generated £14 million in net income and paid £8 million in dividends. Construct the statement of financial position for March 2022 reflecting the changes that occurred at Caledonian during the year.
Table 1: Long term debt and shareholders' equity
| |
£ |
| Long-term debt |
60,000,000 |
| Preference shares |
18,000,000 |
| Ordinary shares (£1 par value) |
25,000,000 |
| Capital surplus |
49,000,000 |
| Accumulated retained earnings |
89,000,000 |
Q1. Explain the difference between book value and market value. Under standard accounting rules, it is possible for a company's liabilities to exceed its assets. When this occurs, the owner's equity is negative. Critically discuss whether this can happen with market values.
Q2. Discuss the importance of cash management in a business.